Hiring Your First Employee in Ontario: A Small Business Checklist

Bringing on your first employee is a milestone — and a legal turning point. The moment you hire someone in Ontario, a cascade of obligations begins: tax registrations, ESA compliance, WSIB enrollment, payroll remittances, and more. Most of these are not optional, and missing a step in your first months as an employer can result in CRA penalties, back-pay orders, or personal liability.

This checklist walks Ontario small business owners through the key steps — from before you post the job to after the employee starts — so you can hire with confidence.

Before You Post the Job

1. Make Sure Your Business Is Properly Structured

If you are operating as a sole proprietor or partnership, you may want to incorporate before hiring. Incorporation provides limited liability protection and can affect how payroll taxes are structured. This is not mandatory for hiring, but it is worth reviewing with a lawyer or accountant.

2. Register as an Employer with the CRA

As soon as you decide to hire, register a business payroll account with the Canada Revenue Agency (CRA). You will need this account to remit source deductions: Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax withheld from employee wages. You can register online through the CRA's My Business Account portal (verify current registration process at Canada.ca).

You must remit deductions to the CRA on a regular schedule — typically monthly for new small employers, though verify the current rules for your situation. Late remittances attract penalties and interest.

3. Register with WSIB

Most Ontario employers are required to register with the Workplace Safety and Insurance Board (WSIB) within ten days of hiring their first worker. WSIB premiums are paid based on your industry rate and payroll. Some industries and types of workers are exempt — verify whether your business falls into an exempt category at wsib.ca before assuming you do not need to register.

WSIB coverage protects workers injured on the job and protects the employer from individual lawsuits related to workplace injuries. Operating without required WSIB coverage while injured workers are uncovered exposes you to significant personal liability.

4. Review Your Insurance Coverage

Your existing business insurance may not automatically cover an employee. Review your general liability and commercial policies and speak to your broker about employer liability coverage before your new employee's first day.

Drafting the Employment Agreement

This is the single most important legal step in the hiring process. As described in detail in our companion guides on offer letters and termination clauses, the employment agreement should include:

• Job title and description
• Compensation (salary or hourly rate, pay frequency, any bonus or commission structure and whether it is discretionary)
• Hours of work
• Vacation entitlement (at or above the ESA minimum)
• Probationary period (clearly defined, referencing applicable law)
• A valid termination clause (the most important clause — without one, you default to costly common-law reasonable notice)
• Confidentiality and IP assignment if relevant
• Reference to the Employee Handbook if you have one

Send the offer letter at least several days before the start date. The employee should sign and return it before their first day of work. Offering the contract on day one (when employment has already begun) can affect the enforceability of key clauses.

Setting Up Payroll

Calculating Gross Pay and Deductions

Every pay period you must:

• Calculate gross wages (hours worked × hourly rate, or salary ÷ pay periods per year)
• Deduct CPP contributions (employee portion — verify current rate at Canada.ca)
• Deduct EI premiums (employee portion — verify current rate)
• Deduct income tax using CRA payroll tables (available at Canada.ca, or through payroll software)
• Add your employer contributions (CPP matching, EI employer premium — as of writing, the employer pays 1.4 times the employee's EI premium — verify current multiplier)

Payroll Software

Manual payroll is possible for a single employee but time-consuming and error-prone. Most small Ontario businesses use payroll software (many options integrate with common accounting platforms) or engage a bookkeeper or accountant.

Pay Stubs

The ESA requires that employees receive a written statement of earnings (pay stub) with each pay period. The pay stub must show the pay period, gross wages, itemized deductions, and net pay. Verify current requirements.

On the First Day: Legal Posting Requirements

Ontario's ESA requires employers to post the current "Employment Standards in Ontario" poster in a visible workplace location. Download the current version from the Ministry of Labour's website. Failure to post is a technical ESA violation.

If you have five or more employees (you are not there yet, but plan ahead), you will also need written workplace health and safety and harassment policies under the OHSA.

Vacation Pay, Statutory Holidays, and Other ESA Requirements

From the first day of work:

• Vacation pay begins accruing (as of writing: 4% of gross wages — verify)
• Statutory holiday pay applies for every public holiday (verify current list of Ontario public holidays)
• Minimum wage must be paid for every hour worked
• Overtime entitlements begin (generally after 44 hours per week — verify)

Do not wait until the employee asks about these entitlements to implement them. Build them into your payroll from day one.

Record-Keeping

The ESA requires employers to keep records of each employee's:

• Name, address, and date of birth (if under 18)
• Start date
• Wages paid each pay period and details of deductions
• Hours worked (for hourly employees and others in certain categories)
• Vacation taken and pay provided
• Public holidays and any substitution agreements

Records must be kept for a minimum period (as of writing: at least three years — verify current requirement). The CRA has separate record-keeping requirements for payroll purposes.

Frequently asked questions